Designing the optimal conservativeness of the central bank
We propose an indicator of the degree of conservativeness of an independent central bank and we derive its optimal social value. We show that from a normative perspective, one can either design a central bank that cares about public spending or that it does not -but in the latter case the optimal weight on output stabilization would have to be higher and the central bank would be less conservative in the Rogoff sense.
Volume (Year): 32 (2012)
Issue (Month): 2 ()
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